Company / division: Vive
HTC is making several announcements at the GDC gaming conference, but to my mind the most interesting is its installment plan for paying for a Vive headset. Instead of paying a lump sump of $799, would-be buyers can now pay $66 per month for 12 months, much as many of us now pay for our phones. One of the criticisms (and limitations) of early high-end VR is the price, but of course an iPhone 7 Plus or Samsung S7 Edge or Pixel XL comes in at $750-770, and we don’t all balk at that price, because none of us pays it upfront. Installment plans make these purchases a lot more palatable, and that’s going to be important for reducing the barriers to adoption here. That doesn’t mean we’re all going to rush out and buy one of these, not least because it still requires a high-end PC as well, but this kind of small step will help accelerate the spread of VR just a little bit.
HTC announced this subscription VR service for its Vive headset at CES, but it’s now opening it up to developers. The fact that only 14,000 consumers have signed up to be notified when it launches is a useful reminder of just how small the VR audience on any of the high-cost platforms is today. And I would guess that many users will still end up shelling out lots of money on a per-game basis because the best premium content won’t be part of the subscription, at least in the long run. But a subscription model for VR makes a ton of sense for non-gaming content as more of that starts to show up, although arguably it’s a better fit for mobile VR experiences which are more attractive to non-gamers rather than the big-ticket PC- and console-based rigs.
HTC has another tough quarter, with revenue down 13% YOY, but smaller losses – TechCrunch (Feb 15, 2017)
I don’t typically track HTC’s financials that closely, because they’re so small (just $700 million in revenue last quarter) and such a minor player at this point, but it’s worth checking in from time to time, especially as HTC expands beyond its traditional smartphone business into VR and ODM manufacturing for Google. Interestingly, there’s very little sign of any meaningful bump in revenues or profits from either of these initiatives, which either means that their contribution is tiny or that the traditional smartphone business is declining even faster than in the past. Revenue was down 13% year on year, and the company has had negative operating margins for seven straight quarters and most of the last three years. On the Q3 earnings call, HTC said that it was near breakeven on its smartphone business, and blamed the VR business for the overall losses. It also refuses to talk about the Pixel business at all on earnings calls, citing the lack of public disclosure by Google (which is odd because Google has confirmed it). Regardless, it’s worth noting that the company’s gross margin is just barely in the double digits, which obviously doesn’t leave much room for marketing and other corporate costs. HTC is one of a number of what were major Android vendors a few years back which have faded considerably, and unlike Sony it doesn’t yet seem to have figured out how to make the business work at its new smaller scale.
HTC will launch mobile VR device as follow-up to Vive – CNET (Feb 15, 2017)
I covered HTC’s Q4 results yesterday, and it was clear that VR was not yet making a big positive dent in the business yet. Part of the reason is that Vive, like Oculus Rift, is a marginal play – it relies on heavy duty existing hardware and is itself expensive. It’s no coincidence that the top selling VR headset today is Samsung’s Gear VR, with over 5 million units, because it’s compatible with many smartphones and costs very little. HTC is smart to move into this territory too, though of course if this device really is limited to one of its own smartphones, that’s a pretty small addressable market too.
It’s musical chairs week in VR, with Hugo Barra leaving Xiaomi to head VR at Facebook, and now an HTC designer moving to Google to work on Daydream VR there. This is one of the hottest areas in tech, and it’s therefore no surprise that it would prompt moves between companies as ambitious people try to find roles in the sector. For HTC, which continues to struggle mightily on the smartphone front and has only a side business in VR, it may become increasingly difficult to attract and retain talent in the face of an onslaught from some of the biggest names in the business.
via The Verge
What happened to virtual reality? – Business Insider (Jan 21, 2017)
This piece argues that VR is currently underperforming expectations, and hasn’t panned out the way many of its proponents hoped. In reality (no pun intended), I think most of the companies have been pretty realistic about the prospects for the current generation of VR technology – Facebook in particular has said it doesn’t expect Oculus sales to be material to its overall financial picture, for example. So this is as much about inflated expectations around VR that came from others – observers, proponents, fans – than from the companies themselves. But in some ways that doesn’t matter – the narrative was that VR was finally here and going mainstream, and now it’s becoming that VR is falling short of expectations. The first was misguided, and now the second flows from those misguided expectations rather than from actual performance in the market. VR is still at a very early stage, and though Samsung has sold 5 million mobile VR headsets, it’s mostly still a niche proposition today, limited largely to the hardcore gaming market. It’ll take both technological advances and much more compelling content to appeal to non-gamers.